Danendra Jain-----------------
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Monday, September 09, 2013

Banks See No Quick Fix For NPA Pain

If government is really interested to know the ongoing fraud in bank in sanction of high value or low value loans for last two decades, CBI should first investigate the wealth of retired CMD and current CMD, ED and all General Managers of all public sector banks and try to compare the same with their total income earned during their entire service. Then only CBI and GOI can assess the volume of corruption rampant in this sector in the name of credit growth or achievement of set targets or to please the politicians especially ministers who hold the key of promotion of bank officers.Unfortunately Ministers are Godfather of all such corrupt officers who have spoilt the future of banks. When the head of any institute is inefficient, inactive and corrupt, one cannot dream of good governance and similarly when government is formed of corrupt ,inactive and ineffective ministers , one cannot imagine of clean administration.Until we get success in getting rid of rampant flattery and bribery culture and until we stop whimsical transfers and arbitrary promotions in all government offices and public sector undertakings we cannot imagine of improvement of health of any bank or any PSU or any government office. The culture of flattery is the root of all maladies prevalent and rooted in the entire system.Bank staff who are wondering in dreamland expecting wage hike of 20 or 30 percent should keep in mind that until they save banks from corrupt executives and corrupt officials they cannot expect earning high profit and when profit is low , banks cannot think of giving respectable wage hike.Politicians have spoilt banks by their dirty vote bank politics and when banks incur losses they will blame bank staff only.Assets in banks will continue to move from standard to Non performing assets and none can stop it without changing the mindset of rulers. Now stress assets are reflected as 5 to 6 percent and it will move to 20 to 30 percent of total advances if the system is not changed immediately. FM or RBI can prescribe hard dose of medicine but they cannot yield fruitful result without the support of all involved in the process. Dirty politics of vote bank has damaged not only the economy of the country but badly affected the social harmony, regional harmony and communal harmony.This is why why there is Free Fall of Indian rupee In Free Market despite all efforts made by learned FM, PM and RBI governor.Because the fall is not due to fault occurred in last few days or few months, it is the consequence of bad policies followed by team of economists ruling this country from Delhi. Similarly accumulated bad assets in public sector banks are not due to global recession or due to natural calamities, they are the bad consequences now precipitating due to bad policies and bad execution of good policies by bad officials sitting at top posts in these banks in nexus with corporate and politicians.

KOLKATA: Despite the Reserve Bank of India's (RBI) hard talks against loan defaulters, banks are expecting more pain in terms of asset quality as the systemic gaps allow bad borrowers to divert funds and go scot-free under the garb of economic slowdown.

Bankers said this trend has almost become viral and put an added stress on the bad loan scenario which has anyway been weighed down by slower economic expansion. It's also a common refrain from bankers that borrowers misuse the debt restructuring facility and use the banking system to recapitalise their failed ventures.

Rajan has declared a war against defaulters by saying that promoters do not have a divine right to continue if an enterprise flops, but the existing legal and administrative gaps have created enough doubts in the mind of a banker that nobody is expecting a quick-fix solution to the spiralling NPA situation.

"Although RBI governor's statement on NPA has sent a strong signal to defaulting borrowers, banks are facing difficulties at the field level in implementing SARFAESI Act and taking physical possession of mortgaged properties due to administrative gaps. This needs to be addressed first, otherwise bad borrowers will continue to use the loopholes and make mockery of the system," United Bank of India executive director Deepak Narangsaid.

Rajan has mandated deputy governor KC Chakrabarty to take a close look at rising NPAs and the restructuring process. The central bank has proposed to collect credit data and examine large common exposures across banks to create a central repository on large credits. "Nothing can change overnight," said South Indian Bank managing director & chief executive officer VA Jospeh. "There are gaps in the system and hopefully the committee finds out the lacuna in the system and address it."

Some suggest that the RBI may use its RTGS network to find the trail of the diverted money. "Even if we know that bank loans are being diverted, we don't have the ammunition to find the trail and create charge on the asset, limiting our ability to recover loans. The RBI's RTGS network can be used in such cases effectively," a senior bank executive said in the condition of anonymity.

The sluggish economic growth has already led to a sharp rise in NPAs, with the gross ratio touching 3.9 per cent in June. The RBI has estimated that gross NPA may rise to 4.4 per cent if the macro-economic situation does not improve. Besides, banks are sitting on a pile of restructured loans.

The Corporate Debt Restructuring Cell has approved 415 accounts amounting to Rs 2.5 lakh crore in the past eight years. By a very conservative estimate, even if 10 per cent of it turns bad, a whopping Rs 25,000 crore worth of loans will add to the NPA list.

With the first quarter GDP growth slowing to 4.4 per cent, a four-year low amid a contraction in mining and manufacturing sectors, banks have every reason to lose sleep. The future looks grim, with global investment bank Nomura cutting India's real GDP growth estimates to 4.2 per cent for 2013-14 from 5 per cent earlier.